IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828

Vol. 3, No. 5, October 2014

A STUDY ON THE EFFECTIVENESS OF FMCG DISTRIBUTORS IN KERALA

MR. KOSHY C.J
ASST. PROFESSOR
DEPARTMENT OF COMMERCE,
PAZHASSIRAJA COLLEGE, PULPALLY, WAYANAD
KERALA, INDIA Pin 673579

Abstract-The

study is undertaken to analyse the effectiveness of

FMCG distributors in Kerala. Through this study we are trying to
understand the level of retailer satisfaction which determines the
effectiveness of FMCG distributors in Wayanad district, Kerala. The
results drawn in the study is purely based on the survey conducted
among the retailers. With a direct distribution system the marketer
reaches the intended final user of their product by distributing the
product directly to the distribution channels are defined and
classified. Their development is explained and new possibilities of
their development in contemporary conditions are indicated. In this
sense, a variety of distribution channels exists, as well as the
contemporary understanding of managing supply chains and value
creation networks. The data was collected from 100 retailers, who
practice regularly. The data needed for the study has been collected
from the retailers through questionnaires and through direct
interviews. Analysis and interpretation has been done by using the
statistical tools and datas are presented through tables and charts.
The results from the study indicates that majority of the respondents
are satisfied with the services offered by the distributors.
Keywords: FMCG, Distributors, Distribution Channels, Retailer
Satisfaction.

I.

INTRODUCTION

Direct marketing is where the goods are sold directly from the
product direct to the customer. A producer does not have to
share its profit with intermediaries and so it is a low cost
channel. The producer controls the whole marketing process
and as a result can protect and maintain its brand image.
Customers are increasingly using direct sales though the
internet and can purchase from the comfort of their own home.
However, it can be expensive to set up these channels and all
the cost of distribution such as storage and damage rest on the
producer. In addition, a recent trend is for customers to search
online for products and then purchase them physically from
outlets after making comparisons on price.
Distribution channels, i.e. marketing channels are being
developed in contemporary conditions of concentration,
internationalisation and globalisation processes. New
structures of vertical marketing systems are thus created. The
expansion of large retail chains from developed countries into
economically underdeveloped countries is very dynamic at the
moment. The process is supported by the explosive
development of IT, as well as by certain trends on the
international geopolitical scene.The importance of distribution
channels is analysed both for individual economic operators,
i.e. groups and for the aggregate national economy. These
types of analyses start with the share of big firms and groups,

both on national and international levels. This is the case of

relationships between different economic operators within
value creation chains. This is why earlier concepts of the role
and importance of commerce in national economy are losing
their importance. That is there are no other parties involved in
the distribution process that take ownership of the product.
FAST MOVING CONSUMER GOODS
Products which have a quick turnover, and relatively low cost
are known as Fast Moving Consumer Goods (FMCG). FMCG
products are those that get replaced within a year. Examples of
FMCG generally include a wide range of frequently purchased
consumer products such as toiletries, soap, cosmetics, tooth
cleaning products, shaving products and detergents, as well as
other non-durables such as glassware, bulbs, batteries, paper
products, and plastic goods. FMCG may also include
pharmaceuticals, consumer electronics, packaged food
products, soft drinks, tissue paper, and chocolate bars.
II.
REVIEW OF LITERATURE
In its broadest sense, when it refers to the whole economic
system, distribution is the allocation of income and assets
within one society. In business economics, distributions relates
to the allocation of goods to the recipients. In general,
distribution includes all activities that enable the transfer of
material and/or economic power over tangible and/or
intangible goods from one economic subject to another
(Wirtschaftsleyikon24.net, 2011). This paper is concerned
with the distribution in business economics, as well as its
implications on the whole economic system, i.e. on the whole
national economy, since distribution is one of the main
functions of retail trade (Wirtschaftsleyikon24.net, 2011).
Domschke and Schield thus emphasize: Distribution
encompasses a system of all activities that are related to the
transfer of economic goods between manufacturers and
consumers. It includes such a coordinated preparation of
manufactured goods according to their type and volume, space
and time, so that supply deadlines can be met (order
fulfillment) or estimated demand can be efficiently satisfied
(when producing for an anonymous market)(Domschke &
Schield, 1994).
Distribution systems are usually divided into:
(a) Acquisition distribution system
(b) Logistic, i.e. physical distribution system.
G. Specht has pointed out that this division is not
completely accurate, since both of these subsystems exhibit
certain common starting points. According to this author,

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 3, No. 5, October 2014

acquisition distribution system management includes the

management of distribution routes, i.e. distribution channels.
Logistic distribution system is focused on bridging the space
and time by transportation and storage, as well as order
processing and shipment, supply logistics, i.e. the movement
of materials (compare Specht, 1988, 34-35).The term
distribution channels can at the moment be replaced by the
term marketing channel. Marketing channel as a more
complex term has been used in the USA since the 1970s,
because the intermediaries include not only those who
participate in the physical flow of a product from the
manufacturer to the end user, but also those that have a role in
the transfer of product ownership, as well as other
intermediary institutions that participate in the value
distribution from production to consumption (Tipuri, 1993,
15-16). Therefore, it is assumed that there are three types of
marketing channels (Kotler & Keller, 2008, 26):
communication channels, distribution channels and service
channels.
Distribution or marketing channels are systems of
mutually dependent organizations included in the process of
making goods or services available for use or consumption.
Moreover, a marketing channel is "the external contactual
organization that management operates to achieve its
distribution objectives (Rosenbloom, 2004, 8). There follow
some more recent concepts of the distribution channel:
Channel of distribution The route along which goods and
services travel from producer/manufacturer through marketing
intermediaries (such as wholesalers, distributors, and retailers)
to the final user.
Channels of distribution provide downstream value
by bringing finished products to end users. This flow may
involve the physical movement of the product or simply the
transfer of title to it. Also known as a distribution channel, a
distribution chain, a distribution pipeline, a supply chain, a
marketing channel, a market channel, and a trade channel.
(Ostrow, 2009). Similarly, distribution channel is defined by
Hill: "Distribution channel one or more companies or
individuals who participate in the flow of goods and services
from the manufacturer to the final user or consumer" (Hill,
2010, 93). Nevertheless, other types of flows should not be
neglected in distribution channels, so that the following
definition is also possible: "Channel of distribution consist of
one or more companies or individuals who participate in the
flow of goods, services, information, and finances from the
producer to the final user or consumer. (Coyle, Bardi, &
Langley, 2003, 106) These are various routes that products or
services use after their production until they are purchased
and used by end users. Therefore, marketing channels, i.e.
distribution channels are all those organizations that a
product has to go through between its production and
consumption (Kotler/Wong/Saunders/ Armstrong, 2006,
858).
III.

OBJECTIVE:

HYPOTHESIS
Ho: Quantity ordered every time has no impact on the retailers
satisfaction
H1: Quantity ordered every time has impact on the retailers
satisfaction

IV.

RESEARCH DESIGN
The research design adopted for the study is
descriptive design. The researcher has to describe the present
situation in order to know the level of effectiveness of
distribution system. Hence descriptive research study is used
and includes survey and fact finding Enquirer. The Sampling
technique used was Simple Random Sampling method. Data
as collected from 100 retailers from Wayanad district, Kerala.
For the purpose of this study, data were collected from both
primary as well as secondary source. Primary data was
collected through questionnaires distributed to the retailers and
through observation. Secondary data were collected from
internal and external sources. Internal sources include
information from company records. External sources are
internet, newspapers text books and through web sites.
To analyze the data the following statistical tools were used.
Percentage analysis
Chi square
V.

DATA ANALYSIS

A comprehensive summary of primary data is analyzed to

study understand the level of effectiveness of distribution
system. The quantitative analysis is presented below:
a) RATE OF SATISFACTION LEVEL
Here we are studying the satisfaction level of retailers on
various factors that is related to the services offered by
distributors. Six factors have been chosen to study the
satisfaction level.
Services

Highly
satisfied

satisfied

Neither
satisfied
nor
dissatisfied

dissati
sfied

Highly
dissatisf
ied

Quality

60

28

At time

63

24

Delivery time

58

18

17

Availability of
products
Billing facility

55

28

11

50

41

Customer
service

56

24

10

To understand the level of effectiveness of

distribution system

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 3, No. 5, October 2014

CHART NO: 2

CHART NO: 1

INTERPRETATION:
From the above Table and, it is clear that most of the
retailers are highly satisfied to Quality of products, Time,
Availability of products, billing facility and Customer service
of distributors. When we analyze the quality of service offered
by the distributors to the retailers, we can see that most of the
retailers have agreed that their distributors are providing a
good service to them. When we analyze the pricing policy of
retailers, i.e.; the price at which the distributors offer products
to retailers, we can see that majority of retailers have agreed
that the distributors offer product at a reasonable rate. The
third variable of the study is delivery time, whether the
distributors are able to provide the goods ordered on time.
When we analyze the data we can see that majority of
respondents have agreed that they receive their goods ordered
on time. Fourth important variable is availability of products,
i.e.; whether the distributors are able to provide different
varieties of products/brands to retailers. We can see that
majority of the retailers have agreed that their distributors are
able to provide a wide variety of goods. Fifth important
variable is the billing facility, i.e.; whether the distributors are
able to provide correct bills and other services. We can see
that majority of the retailers are satisfied with the billing
facility provided by the retailer. The sixth important variable
of the study is the customer service, ie; whether the
distributors are providing a good service to their retailers. E
can see that most of the retailers have agreed that their
distributors are providing a good customer service to their
retailers.
b) CRITERIA FOR CHOOSING DEALERSHIP
Here we are studying what are the criterias that each retailer
consider while selecting a distributor.
Sl.
No.
1
2
3
4
5

Options
Discount
Company
dealings
Availability of
goods
Delivery time
Others
Total

No. of
Respondents

% of
Respondents

5
35

5
35

35

35

25
0
100

25
0
100

INTERPRETATION:
From the above table its evident that majority of the
respondents are choosing distributors because of their dealings
and availability of products. We can see that retailers have
marked both of the variables in the ratio of 35 percent each. 25
percent of respondents choose distributors because of accurate
delivery time. Only five percent of respondents recorded that
they are giving importance to discount given by the
distributor. None of the respondents indicated any other
factors that influence their criteria for choosing dealership.

c)

CHI SQUARE ANALYSIS ON THE

RELATIONSHIP BETWEEN QUANTITIES
ORDERED EVERY TIME AND RETAILERS
SATISFACTION
RETAILERS SATISFACTION

Qty
Ordered

Extremely
satisfied

Satisfied

Dissatisfied

10

Neither
satisfied nor
dissatisfied
1

Extremely
Dissatisfie
d
0

Every time

Most of the
time
Half
the
time
Sometime

35

Never

20

60

10

10

H0: Quantity ordered every time has no impact on the retailers

satisfaction
H1: Quantity ordered every time has impact on the retailers
satisfaction
Calculation of Value
Test statistic 2 = (Oi-Ei) / Ei
Where Oi = Observed Value
Ei= Expected value

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 3, No. 5, October 2014

TABLE SHOWING EXPECTED FREQUENCY

O
E
O-E
(O[(OE)^2
E)^2/E
12

13.57

-1.57

2.4649

0.1816433

16

16.52

-0.52

0.2704

0.016368

19

19.47

-0.47

0.2209

0.0113457

6.49

2.51

6.3001

0.9707396

2.95

0.05

0.0025

0.0008475

7.13

-1.13

1.2769

0.1790884

8.68

0.32

0.1024

0.0117972

13

10.23

2.77

7.6729

0.7500391

3.41

-2.41

5.8081

1.7032551

1.55

0.45

0.2025

0.1306452

2.3

2.7

7.29

3.1695652

2.8

0.2

0.04

0.0142857

3.3

-2.3

5.29

1.6030303

1.1

-0.1

0.01

0.0090909

0.5

-0.5

0.25

0.5

TOTAL

9.2517412

X = (O-E) / E = 9.2517412
Number of Degree Of Freedom:
Ndf = (row-1) (column-1)
(4)

(4) = 16

Table value of X at 5% level of significant = 26.296

products, Time, Availability of products, billing facility and

Customer service of distributors. And also we can see that
there is no relationship between the quantity ordered and
customer satisfaction. The distributors can improve their sales
by including advertisement through mass media in their
promotional strategy. They can achieve more customers by
including other FMCG products. The distributors also should
provide more discounts in bulk purchases so as to motivate the
retailer in showing loyalty and it will attract more customers.

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Chopra, S., & Meindl, P. (2001). Supply chain
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Upper Saddle River, NJ: Prentice-Hall.
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Chains to Clear Dues, the Economics Times , 11th
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Vol V, No 3, 2008, p 22-61.

INTERPRETATION
Ho is accepted since the calculated value of X(9.2517412)
less than the table value of X (26.296). Thus quantity ordered
every time has no impact on the retailers satisfaction.

VI.
CONCLUSION
The study as carried out to measuring the effectiveness of the
services provided by distributors in terms of responsiveness,
reliability, empathy, assurance and tangibles. It was found that
the overall perception about the service quality of distributors
is quiet high. Distributors are making use of all available
resources and focusing on building long term relationship with
the retailers. Retailers are highly satisfied to Quality of

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